UK businesses are performing at their highest level for three years, a new report by the Institute of Directors (IoD) has revealed.

The quarterly research found that, on balance, 72 per cent of bosses felt their companies were doing well, up one per cent from March.

Despite the high level of company performance, business optimism slipped slightly from the previous quarter, with a balance of 40 per cent of firms feeling confident about their prospects, compared with 46 per cent three months ago.

However, the level of optimism is still healthy and the IoD said that increasing interest rates have yet to have a significant impact on British businesses.

The survey also found that business investment intentions and profit expectations both remained strong.

This research will make encouraging reading for entrepreneurs, following the recent economic downturn. Previous studies have shown that increasing numbers of people want to start up their own business, buoyed by the improving economy.

Graeme Leach, chief economist at the IoD, said that all in all, it was an upbeat survey.

“Two thirds of companies say they have seen no evidence of a slowdown in consumer spending in response to interest rates.

“And, despite a fall this quarter, business optimism remains well above the levels seen over the past two years.

“Given the recent interest rate increases, a fall in business optimism was probably inevitable,” he said.